You are here

Agricultural commercialisation in coffee growing areas of Ethiopia

Abstract:

The coffee sub-sector is very important to the Ethiopian economy - in 2005, coffee export generated 41% of the foreign exchange earnings - and provides income for approximately 8 million smallholder households. Policy attention to the sector was always considerable, and its importance has been renewed in the latest PRS, the Plan for Accelerated and Sustained Development to End Poverty (PASDEP). PASDEP puts forward a development strategy based on accelerated economic growth, part of which is hoped to be achieved via increased smallholder commercialisation and market integration.

This paper addresses commercialisation in selected coffee growing areas in Ethiopia. The objectives of the study were (i) to assess the scale of commercialisation in coffee growing areas and to detect household and farm characteristics which might explain variation in the levels of coffee commercialisation among households; (ii) to investigate whether or not, and under which circumstances, cash crop production might have, spillover effects on food crop production; (iii) to investigate farm productivity, labour intensity and consumption effects; and (iv) to draw policy implications and further research needs.

Agricultural commercialisation was found to be comparatively high in the studied Weredas (Districts). On the average, farmers marketed 84% of their farm production. Overall, coffee contributed 70% to the total value of output sold. There is, however, a high inter-household differentiation: the 25% highly commercialised smallholders generated over 95% of their cash income from coffee sales, while the bottom 25% earned 63% of their cash income from selling food crops. About 72% of the variation in the level of commercialisation among households can be explained by the volume of production. Demographic and household factors, wealth and total farm size had no effect on the observed variation in the degree of coffee commercialisation among sampled households. A negative and significant association between the level of household coffee commercialisation and land productivity in non-coffee crops was found, indicating potential trade-offs between the production of coffee, the major cash crop, and other, mainly food crops. No evidence was found of increasing labour intensity as a result of increased coffee production. Household-level food consumption shows only an insignificant association with the level of coffee commercialisation.

Overall, the findings demonstrate the integrated nature of the farming system in coffee growing areas. Despite an overall high level of coffee commercialisation, diversified farming is a strategy pursued by the majority of the surveyed households. The study findings, however, suggest that further specialisation in coffee could enhance overall agricultural productivity.

Increasing smallholder coffee commercialisation is expected to be a viable pathway for agricultural development in coffee growing areas of Ethiopia if trade-offs in the production of coffee and non-coffee, largely food crops, can be minimised. Increased research and policy attention should be paid to the coffee sub-sector, which currently is characterised by low productivity, low coffee quality, low international coffee prices and high market risks..